The practice of imposing municipal accommodation taxes on hotel guests has been spreading across Japan as popular tourist areas look to generate funds to use in promoting themselves to travelers in the wake of the COVID-19 pandemic.

Tokyo is considering increasing its tax for the first time since it became the first area in the country in 2002 to implement the system.

File photo shows tourists visiting the Kaminarimon "Thunder Gate" in Tokyo's Asakusa area on July 19, 2023. (Kyodo)

Currently, hotels in the capital charge 100 yen ($0.70) per person per night for stays costing between 10,000 yen and 15,000 yen and 200 yen per night for rooms over 15,000 yen. The collected tax goes toward tourism-related costs, including for maintaining free public Wi-Fi and operating tourism information centers.

Revenue collected has been increasing since 2011, hitting a record high of around 2.7 billion yen in fiscal 2019, but it fell in 2020 and 2021 due to pandemic travel restrictions and a suspension of the system during the Tokyo Olympics and Paralympics, according to the Tokyo government.

With the recent return of international tourists, the total is expected to recover in fiscal 2023 to about 1.7 billion yen, it said. But that figure falls well short of covering the capital's outlay on tourism promotion in the same year, which is forecast to total around 26.4 billion yen.

With cities and prefectures free to independently set the rate they charge, some municipalities have adopted flat fees higher than Tokyo's. The cities of Kanazawa and Kyoto require guests to pay flat fees of 500 yen and 1,000 yen per night, respectively.

"The situation around the accommodation tax has changed over the last 20 years, so we need to consider a review from a fairness perspective as well," a Tokyo metropolitan government representative said.

Two prefectures and six municipalities in Japan have followed Tokyo's lead and have adopted the system, while others, including the city of Atami in Shizuoka Prefecture and Japan's southernmost prefecture of Okinawa, are considering it.

The town of Kutchan in Hokkaido, home to the popular ski resort Niseko, is the only location that has implemented a percentage tax rate based on the amount spent on accommmodation. A total of 2 percent of the room charge is collected, while the rate is higher for luxury lodgings, such as condominiums in the area that cost over 100,000 yen per night.

Adopting the accommodation tax in areas yet to do so will require setting tax rates, collection methods and defining areas it will be spent, requiring the understanding and cooperation of the local hotel industries.

"There are concerns that (adopting the system) will lead to visitors going to other locations, but we need the funds for promoting tourism, as the city's tax revenue falls amid the aging of and decline in the population," said Kanekiyo Morita, 55, who heads the Atami Hot Spring Ryokan and Hotel Association.

"We would like it to be used toward policies that will improve convenience and satisfaction," he said.